DCIT, CHENNAI V. Rane (Madras) Limited, CHENNAI

ITA 852/CHNY/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6238 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: SP CHIDAMBARAM

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . ! , ' $ BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 852 / MDS/2013 ( / ASSESSMENT YEAR: 2007-08) DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT CHENNAI-600 034. VS M/S. RANE (MADRAS)LTD. PB NO.8262, GANAPATHI BUILDINGS, 154, VELACHERY ROAD, CHENNAI-600 042. PAN:AACCR9772M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. ANIRUDH RAI, CIT /RESPONDENT BY : MR. S.P.CHIDAMBARAM, ADVOCATE / DATE OF HEARING : 28 TH APRIL, 2014 /DATE OF PRONOUNCEMENT : 13 TH JUNE, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-IX, CHENNA I DATED 29.01.2013 FOR THE ASSESSMENT YEAR 2007-08. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COM MISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWA NCE UNDER SECTION 40(A)(I) OF THE ACT IN RESPECT OF OVERSEAS AGENCIES ITA NO.852/MDS/2013 2 COMMISSION PAID TO NON-RESIDENTS WITHOUT DEDUCTION OF TAX AT SOURCE. 2. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT AN IDEN TICAL ISSUE HAS COME UP IN ASSESSEES CASE FOR THE ASSESS MENT YEAR 2004-05 IN ITA NO. 292/MDS/2012 DATED 3.5.2012 AND IN ITA NO.106/MDS/2009 DATED 11.6.2010, WHEREIN THE TRIBUNAL HELD THAT SERVICES RENDERED BY OVERSEAS AG ENTS ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND CO ME UNDER THE PURVIEW OF EXPLANATION 2 TO SECTION 9(1)(VII) O F THE ACT. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT DURING THI S ASSESSMENT YEAR ALSO ONE OF THE OVERSEAS AGENTS NAM ELY JAMES DRUCHAS, USA IS THE SAME AGENT IN THE ASSESS MENT YEAR 2004-05 AND ALSO IN THE CURRENT ASSESSMENT YEA R. THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2004-05 HELD THAT SERVICES RENDERED BY M/S. JAMES DRUCHAS, USA WAS IN THE NATU RE OF FEES FOR TECHNICAL SERVICES AND THE PROVISIONS OF S ECTION 195 ARE ATTRACTED. THUS THE DISALLOWANCE MADE BY THE A SSESSING OFFICER UNDER SECTION 40(A)(I) OF THE ACT WAS UPHEL D BY THIS TRIBUNAL. DEPARTMENTAL REPRESENTATIVE ALSO REFERRD TO THE ITA NO.852/MDS/2013 3 AGREEMENT ENTERED INTO BY THE ASSESSEE IN THE CASE OF ASHOK LEYLAND BUSINESS DEVELOPMENT, DUBAI (HEREINAFTER RE FERRED TO AS ALBD) AND THE OBLIGATIONS OF ALBD WAS AS PER THE AGREEMENT AND BY VIRTUE OF THIS AGREEMENT, DEPARTME NTAL REPRESENTATIVE SUBMITS THAT IT IS NOT MERE PROVIDIN G SERVICES AND OBTAINING ORDERS BY THE ASSESSEE OUTSIDE INDIA AND IT IS PROVIDING TECHNICAL SERVICES TO THE ASSESSEE RENDER ING SERVICES IN COMMERCIAL FINALIZATION, SUBMITS SAMPLE S AND TAKE PRODUCT APPROVAL AND WORK OUT LOGISTICS AND REGULAR LY INTERACT WITH THE CUSTOMERS AND INFORM THEM ABOUT QUALITY AN D SUPPLY RELATED PROBLEMS, SUPPLY TO THE ASSESSEE WITH PERIO DIC INFORMATION ABOUT THE AUTOMOTIVE INDUSTRY ETC. THE REFORE, DEPARTMENTAL REPRESENTATIVE SUBMITS THAT OVERSEAS A GENTS ARE PROVIDING TECHNICAL SERVICES TO THE ASSESSEE AN D THEREFORE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 40(A)(I) FOR NON-DEDUCTION OF TDS ON SUCH PAYMENT WAS JUSTIFIED. 3. COUNSEL FOR THE ASSESSEE REFERRING TO THE AGREEM ENT DATED 5 TH JUNE, 2008 BETWEEN THE ASSESSEE AND M/S. JAMES ITA NO.852/MDS/2013 4 DRUCHAS, USA SUBMITS THAT AS PER THIS AGREEMENT COP E FOR SERVICES TO BE PROVIDED BY THE OVERSEAS AGENT IS ON LY TO IDENTIFY NEW BUSINESS OPPORTUNITIES OUTSIDE INDIA A ND IT IS ONLY SALES COMMISSION PAID FOR MARKETING DONE BY THE OVE RSEAS AGENTS OUTSIDE INDIA AND NOT FOR ANY TECHNICAL SERV ICES PROVIDED BY THE OVERSEAS AS WAS DONE BY HIM IN EAR LIER YEARS. HE SUBMITS THAT DURING THIS ASSESSMENT YEAR SCOPE OF THE AGREEMENT WAS VERY LIMITED AS COMPARED TO THE E ARLIER AGREEMENT AND IT IS ONLY MERE PROCUREMENT OF PRODUC TS APPROVED AND IN EARLIER YEARS THE SCOPE OF AGREEMEN T WAS MUCH MORE WIDER AND THEREFORE THIS TRIBUNAL IN EARL IER YEARS HELD THAT M/S. JAMES DRUCHAS, USA HAS PROVIDED TECH NICAL SERVICES OUTSIDE INDIA. 4. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF FARIDA SHO RES P.LTD. WHEREIN THIS TRIBUNAL HELD THAT AMOUNTS PAID TO OVE RSEAS AGENTS FOR PROCUREMENT OF EXPORT ORDERS AND MARKETI NG ARE NOT LIABLE TO TAX IN INDIA AS THE AGENTS HAVE NOT P ROVIDED MANAGERIAL / TECHNICAL SERVICES IN INDIA. THEREFORE SUCH ITA NO.852/MDS/2013 5 PAYMENTS ARE OUTSIDE THE SCOPE OF SECTION 195 /40(A )(I) OF THE ACT. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON AND THE AGREEMENTS PRODUCED BEFORE US. ON GOING THROUGH THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05, WE FIND THAT THE TRIBUNAL BASED ON THE AGR EEMENT ENTERED INTO BY THE ASSESSEE WITH M/S. JAMES DRUCHA S, USA FOR THE RELEVANT ASSESSMENT YEAR HELD THAT M/S. JAM ES DRUCHAS, USA WAS NOT ONLY PROVIDING PROCURING SALE S OUTSIDE INDIA BUT ALSO PROVIDING TRAINING TO THE ASSESSEES PERSONNEL TO ASSIST THE ASSESSEE IN UNDERSTANDING AUTOMOBILE INDUSTRY IN TERRITORY IN WHICH ALSO ASSESSEE HAS PLACED ITS REPRESENTATIVES. THUS THE TRIBUNAL CAME TO THE CONC LUSION THAT OVERSEAS AGENTS ARE PROVIDING MANAGERIAL/TECHN ICAL SERVICES TO THE ASSESSEE SO AS TO ATTRACT THE PROVI SIONS OF SECTION 195 OF THE ACT. HOWEVER, DURING THIS ASSESS MENT YEAR ON A PERUSAL OF THE AGREEMENT DATED 5.6.2008 ENTERE D INTO BY ITA NO.852/MDS/2013 6 THE ASSESSEE WITH M/S. JAMES DRUCHAS, USA, THE SCO PE OF SERVICES TO BE PROVIDED TO THE ASSESSEE ARE AS UNDE R:- 2.1: DEVOTE ITS BEST EFFORTS TO PROMOTE, MARKET AN D REPRESENT THE PRODUCTIONS OF RML TO CUSTOMERS WITHI N THE TERRITORY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 2.2 GENERATE FRESH ENQUIRES FOR BUSINESS. 6. FROM THE ABOVE SCOPE OF SERVICES OF THE AGREEMEN T, WE DO NOT FIND ANY MANAGERIAL/TECHNICAL SERVICES ARE T O BE PROVIDED TO THE ASSESSEE BY THE OVERSEAS AGENT M/S. JAMES DRUCHAS, USA SO AS TO ATTRACT THE PROVISIONS OF SEC TION 195 OF THE ACT. HOWEVER, THIS AGREEMENT WHICH WAS ENTERED INTO ON 5.6.2008 IS RELEVANT TO THE ASSESSMENT YEAR 2009-10 AND THE ASSESSMENT YEAR UNDER APPEAL NOW BEFORE US IS 2007- 08. NEITHER THE ASSESSEE NOR THE REVENUE PLACED AN AGRE EMENT RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. IN SUCH CIRCUMSTANCES, WE ARE NOT ABLE TO DECIDE THE ISSUE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THIS MATTER HAS TO BE RE-EXAMINED BY THE ASSESSING OFFICER WITH REF ERENCE TO ITA NO.852/MDS/2013 7 THE AGREEMENT PREVAILING FOR THE ASSESSMENT YEAR 20 07-08 AND THE CONDITIONS MENTIONED THEREON FOR THE RELEVA NT ASSESSMENT YEAR I.E. 2007-08. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMI NE AFRESH WITH REFERENCE TO THE AGREEMENT AND THE CASE LAWS R ELIED ON THIS ISSUE. THE ASSESSEE SHALL PROVIDE AGREEMENTS W HICH ARE RELEVANT TO THE ASSESSMENT YEAR. THE ASSESSING OFFI CER SHALL PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 13 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) ( CHALLA NAGENDRA PRASAD ) ( . . ) ( % '( ) ACCOUNTANT MEMBER / * JUDICIAL MEMBER/ ' * ' /CHENNAI, + /DATED, 13 TH JUNE, 2014 SOMU -. /. /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .